Tyson to pay $850 million for animal fats and feed business

(Reuters) – Tyson Foods Inc (TSN.N) said on Tuesday it would buy the poultry rendering and blending assets of American Proteins Inc for about $850 million, as the company looks to recycle more animal products to use in feed and pet food.

Tyson is facing higher feed costs in its meat processing business as prices of commodities like soybeans and corn increase.

In early April Tyson finalized the purchase of three grain elevators from agribusiness company Andersons Inc (ANDE.O). One of the elevators will be used to support Tyson’s planned $300 million chicken processing plant in Humboldt, Tennessee, slated to open around late 2019. Financial terms were not disclosed.

The No. 1 U.S. meat processor earlier this month said it expected chicken feed costs to rise by about $100 million in fiscal 2018.

“This acquisition … gives us the ability to render raw materials in a region we don’t currently serve,” Doug Ramsey, group president of poultry for Tyson Foods, said in a statement on Tuesday.

Tyson will take over American Proteins’ four rendering plants located in Georgia and Alabama and 13 blending facilities throughout southeastern and midwestern U.S. states.

Rendering is a process of using animal byproducts for the production of tallow, grease and feed for animals and aquaculture.

Tyson said it expects its new business to generate adjusted net sales of more than $550 million over the next year.

Tyson said most of American Proteins’ 700 employees are expected to become Tyson’s workers.